'There are still many kind-hearted people who have yet to accept that welfare can induce dependency.' Photo: Mayu Kanamori

Bill Shorten declared that the worst part of the budget is the change to welfare for the young unemployed. The government, he said, was heartless and the cutbacks to welfare would produce an underclass. He is wrong on both counts.

There is already an underclass in Australia and far from being heartless, the government is going to continue to support it in the same way as before.

Shorten must have missed the fine print of the proposals. The reduction in benefits - in amount and the period they can be paid - is not to apply to young people currently assigned to streams three and four of job seekers. These constitute the people least well-equipped to secure jobs.

Stream three includes people who have few if any skills. Stream four includes the homeless, the unemployable, the mentally disturbed and drug addicts - the very people who constitute the underclass.

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Young single parents are also exempt - that is the people whose children are highly likely to join the next generation of the underclass.

Shorten is right to this extent: the government's plans will add to the underclass. If you are an unemployed young person wanting to receive the top level of payments on a continuous basis, you can obtain them by becoming pregnant or by being classified as stream three (significant barriers to employment), and stream four (homeless or a drug addict).

There are still many kind-hearted people who have yet to accept that welfare can induce dependency. Some teenage girls do become pregnant by choice. Poorly educated, living in a dysfunctional family, and seeing few prospects of employment, they take up the career of motherhood knowing that the government will support them.

Similarly, children who are turned off school or in dispute with their parents are less likely to knuckle down and behave properly when they know that Youth Allowance and Newstart are there to support them. Their parents often enough live on welfare and they will do the same.

The young people to whom the new rules do apply are those who are genuinely looking for work and have some skill or capacity - those in streams one and two. They have to wait six months to get a payment and then can receive it only for six months in every 12.

The Treasurer in his budget speech quoted Menzies to the effect that he wanted Australians to be lifters, not leaners. But Joe Hockey's policy on young unemployed does the opposite. The lifters are brought under the new rules, the leaners go on as before.

If you contrive to leave school without skills and sleep on a mate's couch, all will be well. The drug addicts will experience no interruption to their benefits while they maintain their habit. If they produce children, their benefits will increase.

The government - but this is a state government - then has the burden of keeping the children safe.

So the Treasurer's measures look like mere cost-cutting rather than an end to the age of entitlement.

There is a general acceptance of the policy that young people should have only two options: earning or learning. The way to persuade young people that these are the only options would be to provide no welfare payments to people under 25.

A minister who wanted to end the age of entitlement would continue the existing welfare arrangements for those under 25 but declare that in, say, 12 months' time welfare for young people reaching 18 would cease. There would still be young people who needed assistance and support. But this should not take the form of a fortnightly cash payment, which is the great lure to irresponsible behaviour.

Drug addicts would go into rehab; single mothers into a supervised hostel where they would have help in caring for the baby, the opportunity to learn skills and with no in-house boyfriends; those who had emerged illiterate from 10 years of schooling would go to a special school. Those suffering a mental illness would receive longer-term care, not a brief time in some facility and then outside again with a chemist's prescription.

Schemes such as work for the dole would always be available for those who had not managed to find work; they would now be working not for the dole but a living-allowance wage.

The flaw in the ''earn or learn'' approach is that after learning, a young person may still not find work. The usual solution to the disappearance of unskilled work is that all young people should become skilled. But not all have the capacity to do so and there are still the ups and downs of the economy to frustrate the efforts of young job seekers.

So the policy would be learn or earn, study or work, and if there is no work, the government will provide it.

John Hirst is a historian. His next book, Australian History in Seven Questions, will be available in July.